HUBZone program in transition after losing 30 percent of firms

By
Jolie Lee

Agencies have always struggled to meet their governmentwide goals for contracting with Historically Underutilized Business Zone (HUBZone) companies, and it's only going to get harder.

The 2010 decennial Census re-designated areas that previously had been
considered HUBZones, wiping out more than 30 percent of HUBZone companies certified by the Small Business Administration to do business with agencies in that capacity.

One of those firms is Metropolitan Laboratories, based in Portsmouth, Va.
President David Spinazzolo said he found out his business was no longer in a HUBZone in a letter from Census last year.

“This is one of the few federal
programs that's designed to put itself out of
business someday.”

— Mark Crowley,HUBZone Contractors National Council

"I was devastated," Spinazzolo said.

Spinazzolo started his company more than three decades ago. He became HUBZone-certified shortly after the contracting preference program became available in
1998. In order to qualify, Spinazzolo moved his office to a HUBZone.

To qualify for a HUBZone designation, a company also must have 35 percent of its
employees live in the HUBZone, where typically there is high unemployment and lower average income.

Now Spinazzolo is planning to move his company, which does environmental
consulting and lab testing, to another building in Portsmouth that is in a
HUBZone. He estimates he will spend at least $10,000 on the move, plus losing more money from work delays.

"I guess what sticks in my craw, if you will, is that I invest time, I invest
money, I located my business to be in a HUBZone, and then boom, what amounts to almost a luck of the draw … of what Census tract I'm in," Spinazzolo said.

Before the 2010 Census, SBA certified more than 9,200 companies, according to the HUBZone Contractors National Council. Now, SBA said, it has closer to 5,200 companies in its database with a HUBZone certification.

'Putting itself out of business'

"This is one of the few federal programs that's designed to put itself out of
business someday," said Mark Crowley, president of the HUBZone Contractors
National Council. "When areas are excluded from the program, it means their income or unemployment levels have progressed so they no longer qualify for the program. That's what we're all after. That's a good thing."

The downside for agencies, however, is when companies are decertified, it means they must find new, qualified HUBZone firms to do business with.

In fiscal 2011, the federal government awarded 2.35 percent of its
contract dollars to HUBZone businesses, amounting to $9.9 billion. Only a third of
the agencies that receive a grade on the SBA procurement scorecard met their 3 percent HUBZone
goal.

"Federal agencies are struggling, [as well as] the prime contractors who are
supposed to be subbing out a certain percentage of their contracts to small
businesses and HUBZone companies. They're reeling," Crowley said.

The SBA does offer a three-year grace period if a company is decertified.

But Spinazzolo said he never received any notification his company would be
grandfathered, so he is operating as if he has been decertified already and is not
identifying himself as HUBZone to subcontracting bids. It's hurting him, he said,
because with all things equal between two small businesses, the
designation of HUBZone can be the "trump card" to win a contract.

Finding HUBZone companies

The Small Business Administration is doing outreach in HUBZone areas to identify
potential new contractors. This spring and early summer, SBA initiated a HUBZone
recruitment plan at its 68 district offices nationwide and will repeat that
recruitment plan next year.

"What we really wanted to try to identify was, do we have contracts ready, firms
out there, engaged in industries where the federal government is purchasing in?
And how do we get them to be interested in the HUBZone program, be qualified for
the HUBZone program and apply and get approved for the HUBZone program?" said John
Shoraka, associate administrator at the SBA.

SBA also launched a pilot program for companies in HUBZones to call during evening
office hours twice a month to get help.